New data released June 14th by the Federal Reserve finds U.S. industrial production regained lost ground in May, with increases reported across the board for manufacturing output, as well as mining, utilities and capacity utilization.
The Federal Reserve’s latest release on U.S. industrial production and capacity utilization showed overall industrial output increased 0.4%, rebounding from the 0.4% decline reported in April.
The Fed reported small increases in manufacturing output and mining as well as utilities.
Manufacturing capacity utilization edged up 0.2%, as did utilities. Mining output was little changed, up 0.1%, according to the Fed.
Auto Industry Leads Manufacturing Output Gains
May’s manufacturing output report follows a number of lackluster manufacturing reports in recent months.
The first half of 2019 has produced significantly lower output reading for manufacturing overall, including a 0.5% decline in April, while the ISM continues to report that manufacturing is expanding at a softer pace.
Manufacturing production’s 0.2% bump was led by a rise in motor vehicle production, which jumped 2.4% in May, following several months of lagging production.
Year-over-year, motor vehicle production has risen 6%, according to the Fed.
Related: A Closer Look at Growth in the U.S. Motor Vehicle Parts Industry
Additional industry groups that increased output included electrical equipment, appliances, and components; wood production and machinery.
On a year-over-year basis, manufacturing output has risen 0.7%, measured from May 2018 to May 2019.
Capacity Utilization on the Rise
The Fed reported an uptick in the nation’s capacity utilization, which measures the extent to which industrial firms make use of their productive capacity.
Capacity utilization rose 0.2% in May, with companies now utilizing at a rate of 78.1%. This is 1.7% below its long-run average (1972-2018), the Fed noted.
Year-over-year total capacity utilization overall has increased significantly, climbing 2.1% since May of 2018.
Manufacturing capacity utilization lagged slightly behind overall utilization, edging up 0.1% over the month and 1.1% over the year.
Specific Industry Data
Taking a closer look at manufacturing output data, the Fed reports durable goods output rose 0.3% in May, while output in non-durable goods manufacturing rose 0.1%, resulting in a 0.4% overall increase for manufacturing.
On a year-over-year basis, however, durable goods manufacturing was the clear winner, rising 2.3% since May of 2018.
This is compared to non-durable goods output, which declined 0.6% over the same time frame, with declines in apparel and leather; printing and support; and petroleum and coal products dragging down the overall index.
In May, however, output in non-durable goods edged up, lead by a 1.6% increase in plastics and rubber products.
Where is U.S. Manufacturing Headed?
The increase in manufacturing output is welcome news following several reports that point to a slowdown in the sector.
May’s labor report fell short of expectations, adding just 75,000 jobs in May, with manufacturing jobs virtually unchanged over the month (+3,000).
The Institute for Supply Management’s recent report on manufacturing activity finds that new orders, production and employment continues to expand, though at a slower pace than reported in previous months.
Following a record expansion, the overall index is now skirting contraction territory, coming in at 52.1%
Related: Manufacturing Slowdown? What U.S. Industry Executives are Saying About Business Conditions:
Additionally, IHS Markit’s Manufacturing Purchasing Managers’ Index concurred with the ISM’s data, with their diffusion index hitting 50.5%, the lowest it’s been since September 2009.
U.S. manufacturers are contending with a number of uncertainties, including a growing trade war with China and a tight labor market.
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